When an irrevocable trust needs to be decanted

Traditionally, the only way to change an irrevocable trust is with the permission of beneficiaries and costly, time-consuming legal action. The idea behind an irrevocable trust is that the assets in it are outside of the control of the grantor and that it remains unchanged. However, some states, including North Carolina, now permit a process known as decanting that changes the irrevocable trust.

Decanting involves the creation of a second trust that the contents of the first trust are “poured” into. However, it is the trustee and not the grantor who creates the second trust.

There are a number of reasons decanting might be necessary. A person might create a trust for a beneficiary, but that person’s assets could significantly change requiring a change in the trust. Alternately, a beneficiary might go bankrupt, get a divorce, become an addict or otherwise have a change in life that makes a change in the trust necessary. In this situation, the second trust might be created to allow the trustee decision-making powers over how distributions are made.

A trust may need to be decanted if something is unclear or incorrect in the original trust document. Decanting may give certain powers or responsibilities to advisers or beneficiaries. Decanting may also be used when trusts need to be separated or combined or to address the special needs of a beneficiary.

Some people who are creating an estate plan may not realize that trusts can benefit them and their families. Not just for the very wealthy, trusts can be designed to help protect assets from creditors or divorce or can support relatives with special needs without interfering with any federal benefits they are entitled to receive. An attorney can outline other ways in which a trust can be an integral part of an overall estate plan.